1) Merchandise is sold for $3,600, terms FOB destination, 2/10, n/30, with prepaid
freight costs of $150. If $500 of the merchandise is returned prior to payment and the
invoice is paid within the discount period, the amount of the sales discount is $65.
2) Period costs can be found in the balance sheet.
3) The declaration and issuance of a stock dividend would be reported on the statement
of cash flows.
4) The balance sheet accounts are referred to as real or permanent accounts.
5) The method of analyzing capital investment proposals in which the estimated
average annual income is divided by the average investment is the average rate of
return method.
6) The income summary account is closed to the retained earnings account.
7) Generally accepted accounting principles require companies to use only one factory
overhead rate for product costing.
8) The single-step income statement is easier to prepare, but a criticism of this format is
that gross profit and income from operations are not readily available.
9) Activity-based costing provides more accurate and useful cost data than traditional
systems.
10) The master budget of a small manufacturer would normally include all necessary
component budgets except the budgeted balance sheet.
11) The declaration of a cash dividend decreases a corporation’s stockholders equity and
decreases its assets.
12) If a firm has a current ratio of 2, the subsequent receipt of a 60-day note receivable
on account will cause the ratio to decrease.
13) For a period during which the quantity of inventory at the end equals the inventory
at the beginning, income from operations reported under variable costing will equal
income from operations reported under absorption costing.
14) A purchase order establishes an initial record of the receipt of the inventory.
15) If direct materials cost per unit decreases, the amount of sales necessary to earn a
desired amount of profit will decrease.
16) Zorn Co. budgeted $600,000 of factory overhead cost for the coming year. Its
plantwide allocation base, machine hours, is budgeted at 100,000 hours. Budgeted units
to be produced are 200,000 units. Zorn’s plantwide factory overhead rate is $00 per unit.
17) Nonmanufacturing costs are generally classified into two categories: selling and
administrative.
18) A single plantwide overhead rate method is very expensive to apply.
19) When a plantwide factory overhead rate is used, overhead costs are applied to all
products by a single rate.
20) Financial reporting systems that are guided by the principle of exceptions concept
focus attention on variances from standard costs.
21) Journalize the entries to record the following selected transactions:
22) The adjusting entry to record the amortization of a discount on bonds payable is
A.debit Discount on Bonds Payable, credit Interest Expense
B.debit Interest Expense, credit Discount on Bonds Payable
C.debit Interest Expense, credit Cash
D.debit Bonds Payable, credit Interest Expense
23) The Transformations Hair Salon uses an activity-based costing system in its beauty
salon to determine the cost of services. The salon has determined the costs of services
by activity as follows:
24) A company has 10,000 shares of $10 par common stock outstanding. Prepare entries
to record the following:
(a) Purchased 1,500 shares of treasury stock at $16. The treasury stock is accounted for
by the cost method.
(b) Sold 1,000 shares of treasury stock at $19.
(c) Purchased equipment for $80,000, paying $25,000 in cash and issuing 4,000 shares
of common stock for the remaining.
(d) Sold 500 shares of treasury stock at $14.
25) When the fixed costs are $120,000 and the contribution margin is $30, the
break-even point is
A.16,000 units
B. 8,000 units
C. 6,000 units
D. 4,000 units
26) Which of the following is the appropriate general journal entry to record the
declaration of a cash dividends?
A.Retained earnings
Cash
B.Cash Dividends payable
Cash
C.Paid-in capital
Cash Dividends payable
D.Cash Dividends
Cash Dividends Payable
27) On June 8, Alton Co. issued an $90,000, 6%, 120-day note payable to Seller Co.
Assuming a 360-day year for your calculations, what is the maturity value of the note?
A.$90,450
B.$90,000
C.$91,800
D.$95,400
28) Which of the following is an advantage of the cash payback method?
A.It is easy to use.
B.It takes into consideration the time value of money.
C.It includes the cash flow over the entire life of the proposal.
D.It emphasizes accounting income.
29) Accounts are classified in the ledger
A.chronologically
B.alphabetically
C.in accordance with their appearance in the financial statements
D.so that accounts used most often are listed first
30) Which of the following can be found on the statement of cash flows?
A.cash flows from operating activities
B.total assets
C.total changes in stockholders’ equity
D.changes in retained earnings
31) If fixed costs are $850,000 and variable costs are 60% of sales, what is the
break-even point (dollars)?
A.$2,125,000
B.$ 340,000
C.$3,400,000
D.$1,416,666
32) On the chart of accounts, the balance sheet accounts are normally listed in the
following order
A.liabilities, assets, stockholders equity
B.assets, liabilities, stockholders equity
C.stockholders equity, assets, liabilities
D.assets, stockholders equity, liabilities
33) On January 1, 2014, Gemstone Company obtained a $165,000, 10-year, 7%
installment note from Guarantee Bank. The note requires annual payments of $23,492,
with the first payment occurring on the last day of the fiscal year. The first payment
consists of interest of $11,550 and principal repayment of $11,942. The journal entry to
record the issuance of the installment note for cash on January 1, 2014 would include:
A.a debit to Interest Expense of $11,550
B.a credit to Interest Payable of $11,550
C.a credit to Notes Payable of $165,000
D.a debit to Notes Payable of $165,000
34) Income from operations of the Commercial Aviation Division is $2,225,000. If
income from operations before service department charges is $3,250,000:
A.operating expenses are $1,025,000
B.total service department charges are $1,025,000
C.noncontrollable charges are $1,025,000
D.direct manufacturing charges are $1,025,000
35) Which of the following provisions of the Internal Revenue Code can be used to
reduce the amount of the income tax expense arising from capital investment projects?
A.Deductions for individuals
B.Depreciation deduction
C.Minimum tax provision
D.Charitable contributions
36) Present entries to record the following summarized operations related to production
for a company using a job order cost system:
(a) Materials purchased on account $167,000
(b) Prepaid expenses incurred on account 12,200
(c) Materials requisitioned:
For production orders 153,700
For general factory use 2,700
(d) Factory labor used:
On production orders 141,300
For general factory purposes 12,000
(e) Depreciation on factory equipment 37,000
(f) Expiration of prepaid expenses,
chargeable to factory 6,100
(g) Factory overhead costs incurred on account 67,000
(h) Factory overhead applied, based on machine hours 105,300
(i) Jobs finished 415,300
(j) Jobs shipped to customers: cost, $412,000;
selling price 638,000
37) Which of the accounts below would appear in the Balance Sheet columns of the
work sheet?
A.Service Revenue
B.Prepaid Rent
C.Supplies Expense
D.None are correct
38) Accountants prefer the variable costing method over absorption costing method for
evaluating the performance of a company because
A.by using the absorption costing method, income could appear to be higher by
producing more inventory
B.by using the absorption method, more sales will be generated
C.by using the variable costing method, the cost of goods sold will be higher as more
units are manufactured and sales remain the same
D.by using the variable costing method, all fixed and variable costs are included in the
unit cost of the product manufactured
39) Which of the following is not one of the common types of responsibility centers?
A.Cost Center
B.Profit Center
C.Investment Center
D.Revenue Center
40) Beginning inventory, purchases and sales data for T-shirts are as follows:
Assuming the business maintains a periodic inventory system, calculate the cost of
merchandise sold and ending inventory under the following assumptions:
a. FIFO
b. LIFO
c. Average cost (round cost of merchandise sold and ending inventory to the nearest
dollar)
41) Which account would normally not require an adjusting entry?
A.Wages Expense
B.Accounts Receivable
C.Accumulated Depreciation
D.Retained Earnings
42) The budget for Department 10 of Treble Company for the current month ending
March 31 is as follows:
During March, the costs incurred in Department 10 of Treble Company were materials,
$204,000; factory wages, $285,000; supervisory salaries, $63,600; depreciation of plant
and equipment, $35,000; power and light, $21,360; insurance and property taxes,
$14,400; maintenance, $9,456.
43) The journal entry to close the Fees Earned, $750, and Rent Revenue, $175, accounts
on December 31st during the closing process would be:
A.Dec. 31 Fees Earned 750
Rent Revenue 175
Income Summary 925
B.Dec. 31 Income Summary 925
Fees Earned 750
Rent Revenue 175
C.Dec. 31 Revenues 575
Income Summary 575
D.Dec. 31 Income Summary 925
Revenues 925
44) Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling
prices are: $55; $78; and $32, respectively. The variable costs for each product are: $20;
$50; and $15, respectively. Each product must go through the same processing in a
machine that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales
take 7 hours, and Wales take 1 hour.
Which product has the highest contribution margin per machine hour?
A.Bales
B.Tales
C.Wales
D.Bales and Tales have the same
45) The Excelsior Company has three salespersons. Average sales price per unit sold,
average variable manufacturing costs per unit, and number of units sold for each
salesperson is shown below.
Commissions are according to the following schedule:
Prepare a contribution by salesperson report.
46) Expenditures for research and development are generally recorded as
A.current operating expenses
B.assets and amortized over their estimated useful life
C.assets and amortized over 40 years
D.current assets
47) Which of the following accounts usually has a debit balance?
A.Purchase Discounts
B.Sales Tax Payable
C.Allowance for Doubtful Accounts
D.Freight-In
48) Zach Company owns 45% of the voting stock of Tomas Corporation and uses the
equity method in recording this investment. Tomas Corporation reported a $20,000 net
loss. Zach Company’s entry would include a
A.Credit to cash for $9,000
B.Debit to the investment account for $9,000
C.Credit to the investment account for $9,000
D.Credit to a loss account for $9,000
49) Any unamortized premium should be reported on the balance sheet of the issuing
corporation as
A.a direct deduction from the face amount of the bonds in the liability section
B.as paid-in capital
C.a direct deduction from retained earnings
D.an addition to the face amount of the bonds in the liability section
50) Zeke Company is a manufacturing company that has worked on several production
jobs during the 1st quarter of the year. Below is a list of all the jobs for the quarter:
Job 356, 357, 358 & 359 were completed. Jobs 356 & 357 were sold at a profit of $500
on each job.
What is Gross Margin for Zeke Company as of the end of the 1st quarter?
A.$1,685
B.$2,685
C.$1,000
D.$685
51) The method of determining depreciation that yields successive reductions in the
periodic depreciation charge over the estimated life of the asset is
A.units-of-production
B.declining-balance
C.straight-line
D.time-valuation
52) Match each of the following terms associated with notes receivable with the best
description of that term.
1>The time between the date a note is issued and the due date of the note. A. Notes
Receivable
2>The party promising to pay a note B. Maturity Value
3>The amount due when the note is paid off. C. Interest
4>The stated rate charged for using the money of another party D. Interest Rate
5>The dollar amount listed on the promissory note. E. Dishonored Note
6>The amount charged for using the money of another party. F. Face Amount
7>A formal written instrument that represents amounts due from customers. G. Maker
8>A note that is not paid when it is due H. Term
53) If the effect of the debit portion of an adjusting entry is to increase the balance of an
expense account, which of the following describes the effect of the credit portion of the
entry?
A.decreases the balance of a stockholders equity account
B.increases the balance of a liability account
C.increases the balance of an asset account
D.decreases the balance of an expense account
54) The journal entry a company uses to record accrued vacation privileges for its
employees at the end of the year is
A.debit Vacation Pay Expense; credit Vacation Pay Payable
B.debit Vacation Pay Payable; credit Vacation Pay Expense
C.debit Salary Expense; credit Cash
D.debit Salary Expense; credit Salaries Payable
55) Assume that three identical units of merchandise are purchased during October, as
follows:
Assume one unit is sold on October 31 for $28. Determine Cost of Merchandise Sold,
Gross Profit, and Ending Inventory under the Average Cost method.
56) Chasteen Company acquired mineral rights for $9,100,000. The mineral deposit is
estimated at 65,000,000 tons. During the current year, 18,375,000 tons were mined and
sold.
Required:
57) Rosser Company produces a container that requires 4 yds. of material per unit. The
standard price of one yard of material is $4.50. During the month, 9,500 chairs were
manufactured, using 37,300 yards.
Required: Journalize the entry to record the standard direct materials used in
production.
58) On November 1st, Nikle Company made a cash payment of $200,000 on a note
payable that was generated in the purchase of a building and land. Prepare the journal
entry to record this transaction.
59) Skyline, Inc. purchased a portfolio of available-for-sale securities during 2012. The
cost and fair value of this portfolio on December 31, 2012, was as follows:
Required:
Provide the journal entry to record the adjustment of the available-for-sale security
portfolio to fair value on December 31,
Where will the information from the journal entry be reported on the financial
statements?
60) Prepare entries to record the following selected transactions completed during the
current fiscal year: